Keep Exploring – Carnarvon boss tells AOG Conference

THE ROADHOUSE BOWSER: During his lunchtime address at the AOG conference in Perth, Carnarvon Petroleum CEO Adrian Cook sent out a warning to his exploration peers to avoid a knee-jerk reaction to the current oil price situation.

When it comes to recent exploration achievement in the Oil & Gas Industry, few can surpass Carnarvon Petroleum’s (ASX: CVN) Phoenix South-1, located in the Bedout Sub Basin in the North West Shelf.

At the time Pheonix South-1 was hailed as a discovery of great importance.

Cook told his lunchtime audience that he described it at the time to be, “the most significant new oil play in the North West Shelf since the Enfield discovery opened up the Exmouth Basin almost 20 years ago”.

Of course much has been said about the discovery since, however it was a cautionary undertone to Cook’s presentation that caught the ear of THE BOWSER.

Cook spoke of the optimistic nature possessed by explorers (he of course referring to those in his industry, however, his developing thesis could easily transfer to their comrades in the mining industry).

“While we’re optimists, we’re also conditioned to expect and prepare for failure,” he said.

“Some of the more experienced geologists amongst us might even say that failure is a vital and integral step on the road to eventual exploration success.

“Unfortunately this road is one that is paved with numerous disappointments, false starts and failures, along with the dreaded ‘technical successes’, all of which I can personally attest to.

“This is the masochistic element of an explorers’ existence.

“Explorers must expect and even make a virtue of failure as the price for eventual success.”

Cook’s predilection for exploration and its importance to his industry became apparent as he spoke of how new discoveries become the catalyst for a series of investments in development projects.

These projects, in turn, provide employment for skilled people with a range of services, products and technologies that stimulate growth across a wide range of industry sectors and throughout the broader economy.

“In short, oil and gas exploration is the lifeblood of our industry and directly and indirectly supports tens of thousands of jobs across Australia and is needed to attract investment that creates long term economic growth and national prosperity,” he continued.

He turned a magnifying glass on the Phoenix South-1 discovery, telling us how the opportunity to develop and bring a new oil province into production was a rare and potentially transformational event for the Australian oil and gas sector.

“This investment has the potential to generate significant long-term benefits for our national economy,” he said.

These activities also bring employment and business benefits, not to mention significant financial contributions in the form of State and Federal Government taxes.”

As successful as Carnarvon has been, like any company it too is feeling the pinch being delivered by the recent fall in global oil prices driven by global political, economic and cultural forces that are beyond the control of a company’s boardroom table.

“There’s no doubt that lower oil prices are having a positive impact within some parts of our economy,” he said.

“The most significant impact of lower oil prices is a material and immediate cutback in oil and gas exploration.

“Around the world drilling campaigns are being scaled back, deferred or cancelled, exploration budgets are being slashed and exploration departments are sadly being scaled down.

“We are seeing this response in big and small oil companies alike.”

Cook’s concerns seem to be materialising with redundancies already happening within the industry, which he sees to be an over-reaction to a relatively short-term drop in oil prices.

He suggested the real danger to the industry if it keeps heading down this track, will be a resulting negative impact on many careers and businesses, with reputations and relationships irreparably damaged as hundreds of experienced people permanently leave the industry.

“This aggressive attitude is potentially creating the conditions for the start of the next skills shortage that could arise when oil prices stabilise and companies decide to start exploring again,” Cook warned.

“It drives up costs and perpetuates the ‘boom/ bust’ mentality that characterises our industry.”